The three instruments include a restructured Partial Credit Guarantee (PCG) scheme, the Quasi Equity and the Project Preparation Facility. They are projected to offer financing solutions and support private sector led industrial development and broader economic diversification and also to alleviate the effects of COVID-19 pandemic.
Through this initiative, the LNDC has partnered with all the four commercial banks in the country. Designed under the Development Financial Unit, the three instruments come with a total envelope of close to M410 million plus M350 million pledged by government particularly for the Partial Credit Guarantee (PCG) scheme.
Fully Basotho owned medium to large firms with three years of profit and a 10 percent growth in annual turnover for the past three years are among the beneficiaries. The Quasi Equity instrument, for instance, will provide innovative finance to fast growing local companies which promise high development effects, mostly in agriculture and manufacturing. “The product will be offered as a standardised profit sharing arrangement with up to two years of moratorium,” the LNDC said on Thursday last week.
The maximum loan amount under this instrument will be subject to fund capitalisation, at 15 percent single borrower limit and other considerations. To be eligible under this instrument, the borrower should be in a position to contribute 20 percent project costs, fall under the LNDC priority sectors and have a three-year track record with no payment default within that period.
The Project Preparation Facility on the other hand is designed following a trust fund model where government through LNDC will contribute funding together with external partners and the LNDC as the administrator will charge a fee for managing fund contributed by partners. “Today marks the first product launch by LNDC’s Development Finance Unit since the unit was established in 2018 after the approval of the LNDC Strategic Plan 2018-23.